SEBI reviews derivatives settlement framework after CAS rollout

The Securities and Exchange Board of India (SEBI) is reviewing the settlement price framework for derivatives on expiry days following the rollout of the Closing Auction Session (CAS) mechanism. SEBI Chairman Tuhin Kanta Pandey stated that the regulator is examining concerns regarding how settlement prices are determined to ensure efficient capital mobilization and investor trust.

The CAS was introduced to improve end-of-day price discovery by matching orders at a single equilibrium price rather than relying on volume-weighted average prices. The regulator is currently assessing over 3,500 comments received in response to its consultation paper, which covers modifications to the CAS, market timings, and derivative contract settlement methodologies.

Pandey indicated that the regulator intends to move quickly following the close of the consultation period. Additional regulatory focuses include improving liquidity in commodity derivatives by examining position limits for non-agricultural contracts and addressing Goods and Services Tax (GST) issues affecting commodity deliveries. SEBI also aims to deepen cash markets and strengthen securities borrowing and lending mechanisms.